The Gilted Age: Ex-Gilt Groupers are running this town

You can't quite call it a mafia. To earn that categorization, the mass of ex-Gilt Groupe employees in New York's tech, media and fashion industries would require, at the very least, a successful exit. Going by the standard definition of a tech mafia, that successful exit would fuel their mafioso investments in new startups, often together, and with many entangling alliances. For that, New York has the Huffington Post Mafia. Or, one generation prior, the Doubleclick mafia, which Gilt Groupe founder and CEO Kevin Ryan was a member of.

No, the revolving door at Gilt Groupe has created more of a Gilt diaspora, but it reaches throughout the New York tech world nonetheless. They take with them the experiences of what worked early on as Gilt experienced runaway ecommerce 2.0 success, along with warnings of what subsequently tripped the company up.

The flash sale site was an early darling of the New York tech scene, expanding to 90 cities and six new verticals in just a couple of years. It raised $221 million in venture backing, last valued at just over $1 billion. At one point, Gilt was hiring an employee a day, beefing up to a team of 1000. But last year, the talent began cycling out the door as fast as it came in -- sometimes by the talent's choice and other times at Ryan's behest.

At first, the reports of Gilt laying off 90 employees and restructuring several of its business units were painted as merely "cleaning up house" for the company's certain IPO. Then we realized we'd been talking about that IPO since 2011, and it was still nowhere in sight. Maybe Gilt was actually struggling.

It didn't help that the whole daily deal market had gone sour and other luxury flash sale companies were moving downmarket, too. In June, the departure of key executives at Jetsetter has soured morale to the point where Ryan asked CEO Drew Patterson to step down. It felt as if Gilt had gone from high flying startup to drama-ridden turnaround story in a matter of a year. Even Ryan, who had taken over as CEO from co-founder Alexis Maybank, stepped down himself last month; he was replaced with Citigroup CMO and board member Michelle Peluso.

Here's a sampling of the Gilt diaspora. Obviously some of these people left before Gilt Groupe's drama and layoffs of the last year, but they're included to paint a picture of the company's wider impact on New York's tech ecosystem. Feel free to tell me who I've missed:

One thing they've taken from Gilt is its focus on visual web navigation. The company, started long before the Great Pinterestification of the Web, was the first startup to really bring curation and an editorial eye ("content and commerce") to e-commerce. Now, those words are practically required on a commerce startup's business plan. But prior to Gilt, the greatest e-commerce innovations were all about efficiency and search. Amazon.com's nuts-and-bolts approach ignored the fun of browsing through beautiful things, something Gilt Groupe pioneered with its well-curated merchandise, emails and visual navigation. It clearly works -- see Fab, Rent the Runway, Zulilly and Opensky (founded by an ex-Gilter) for proof.

Gilt's focus on visuals extended to its offline culture, too, creating a strange coder-meets-fashion snob environment that can only exist when a tech company is also a luxury goods company. Some former employees are relieved to escape the Conde-Nast-cafeteria-esque pressures of dressing fashionably for work each day (and the judge-y looks that come when you don't). "I've worn the same pair of pants all week," one joked. "I love this life!"

Fashion snobbery aside, the biggest thing ex-Gilters have in common is that they went to companies with little or no inventory. Leah Park and Christian Leon started Vaunte, which is a marketplace for luxury goods. Shan-Lyn Ma went to Chloe & Isabel, which produces its jewelry in-house, and Richard Mumby went to Bonobos, which produces its men's clothing in-house (Mumby has since left). Same for Jen Carr-Smith, Kate Furst and Ayesha Ahmad, who all went to J. Crew. Even David Park, who went to Zynga, Chris Maliwat at Facebook, and the many ex-Gilters who founded consumer web startups -- there's no risk of running out of inventory for their products.

Inventory was one of Gilt's biggest issues. The company thrived in 2008 and 2009, a time when cutting costs was trendy, flash sale sites a hot new thing, and news anchors were not embarrassed to use words like recessionista. Luxury design houses were in dire straits and, having previously taken an "ignore and hope it goes away" approach to the Internet, realized they should probably experiment with some form of e-commerce. So, with some adept salesmanship on Gilt's part, they let the company buy, photograph and sell their off-season stock at a discount online.

But, by nature of it being exclusive and luxury, inventory was limited. It became even moreso as competition for end-of-season inventory flooded in from me-too competitors like HauteLook and Rue La La.

As Gilt grew and the recession faded, the company had to stretch its definition of what a "designer" is, offering flash sales from brands like Free People, the 42-location mall store owned by Urban Outfitters. (That sale was my cue to unsubscribe; I'm not a snob, I just don't need a site like Gilt to help me find that kind of sale.) The feeling that Gilt offered a special, elite shopping experience disappeared as the company grew and it struggled to maintain the same quality of merch. Luxury brands are a finicky bunch.

Others blame Gilt's struggles on its solution to that problem: expanding into new verticals, or as the company said at the time "selling more things to the same customer." I'd call it doing too many things too fast. The company poured resources into categories with unlimited inventory -- travel, food, home goods and local deals all in a matter of a couple years, building them into decent-sized businesses.

It was a defensive move -- all the well-funded flash sale and group buying sites bought themselves maniacal growth on the advice of their investors. The business model, while novel and effective, had zero barriers to entry, so competitive success depended on being the first and the biggest.

We've seen the same problem already happening in subscription commerce, the latest fad in e-commerce business models. Beachmint started with shoes but in a matter of a couple years ballooned to six different verticals, began cross-selling home goods, intimates, jewelry, and apparel to its monthly subscribers. It's worked out about the same as it did for Gilt, with the company experiencing some layoffs and management changes as it attempts to catch up its slightly bigger competitors, ShoeDazzle and JustFab.

The ironic thing is that as Gilt bleeds talent, 10Gen, the other company Ryan and his perennial CTO Dwight Merriman started after Doubleclick, continues to soak it up. Not from Gilt, but from Wall Street. The company, backed by $73 million in venture capital and valued last at $550 million, is often named as one of the city's most exciting startups. And it's the exact opposite of Gilt -- hardcore tech for hardcore programmers.

Whether the Gilt diaspora left the company out of frustration, layoffs, a design to do their own thing, or they simply outgrew it, the effects of Gilt's explosion and implosion have had a deep impact on New York's tech ecosystem, much of it positive. The company pulled top talent from the media and fashion industries, and when they leave, they're often staying in tech.

And despite the rocky 2012, Gilt's outlook is positive as well. Its estimated revenue for last year was $610 million, according to a research report from Candlestick Advisors, and it has turned a profit for the first time. With Ryan out and Peluso at the helm, former employees say Gilt is on the right track for its IPO, finally.

A Gilt IPO, warts and all, will be huge for New York tech (our first, I believe, since Doubleclick). Most importantly, it'll make a few millionaires out of its employees -- the potential start of a real Gilt mafia. I guess that would make Ryan the don-in-waiting.